Friday, November 16, 2007

Sears Holdings Earning Release: Why So Late?

Barron's had a very interesting article yesterday about the release of Sears Holding (SHLD) earnings.

From the Article:

" was only late yesterday (Monday) that investors learned that Sears Holdings, which owns Sears and K-Mart, will report third-quarter earnings on Nov. 29 before the financial markets open.

The computer programs that detail earnings dates had predicted Sears Holdings would report earnings Nov. 13, which is three months after the company reported second-quarter earnings.

All the uncertainty about a basic corporate fact that so many other companies divulge without any great mystery, coupled with concerns about weakening consumer spending, increased the implied volatility of Sears Holdings' options, perhaps even more so than if the company were transparent about its earnings report date.

Prior to Monday's press release, most investors expected earnings before November options expire. This caused the implied volatility of Sears Holdings' November options to hover around the range of 60%, or 12 volatility points higher than December options. In fact, many traders had implemented November "put spreads" -- selling one high-priced option to lower the cost of buying another put option -- to hedge against a decline in the stock. Today, investors have to readjust positions as the new earnings date occurs in the December expiration."

Why the delay on Sears part? Easy. Lampert is busy buying shares back by the truck load and wants to get as much buying done before he releases the information. The delay gives him another two weeks to buy shares near their 52 week low levels (down 27%).

A reader alerted me to the fact other value investors have been busy buying shares currently (a thank you to Russ):
Pershing Square - 5 million shares
Fairholme Capital (legendary value investor of FAIRX) - 2.9 million (192% increase from last filing)
Third Point - 650K shares

Last quarter Sears's board approved a $1.5 billion share repurchase program. Anyone want to bet that when results are released that buyback plan is completed? Does anyone think that ESL, Lampert's hedge fund may have bought a few more shares?

 Subscribe in a reader


blogger templates | Make Money Online